The yen peaked at a three-month dollar high yesterday as speculators continued to trim their portfolios to reflect renewed faith in the value of the Japanese currency.

The dollar fell from ¥116.83 to ¥115.820 over the course of the day while the euro-dollar rate fell from $1.3193 to $1.3094 and the pound fell to $1.9222.

The yen rose against the 16 most-traded currencies as carry trades, in which investors borrow in a low-yielding currency to lend in a higher, continued to unwind.

"Investors are cutting back their risk exposure," Max Tessier of CIBC Global Asset Management told the International Herald Tribune.

"The carry trade is running against investors. There is no argument to sell the yen right now."

Once the currency begins to rise, carry-traders have to borrow the yen to pay back their borrowing. The implied volatility of the yen - a measure of how much it is expected to fluctuate - has also risen sharply in recent days.